Former Nintendo executive Dan Adleman has released a new blog update where he talks at length about the indie market, particularly with regards to pricing, He later goes on to compliment Nintendo\’s handling of video game pricing amidst the onset of mobile game pricing. \”Nintendo was able to make a game for which there is no suitable substitute, and they’ve sent a clear signal that they’re standing by what they think it’s worth.\”
The Economics 101 approach to pricing is fairly straightforward. There is a group of potential buyers out there. Each one makes an independent assessment of what they feel your game is worth. If you have perfect information about what each person’s maximum willingness to pay is, you could pick the price point that will maximize revenue (price x quantity sold,where the higher the price is, the lower the quantity sold will be and vice versa), and therefore profits. In the case of digitally distributed videogames, once the game is done, maximizing revenue and profits is the same thing, since all of the costs are sunk/fixed. There are no real incremental costs to producing more copies of your game that factor into the decision.
Anyone whose maximum willingness to pay was higher than the price you set is getting a great deal. Anyone whose maximum price is equal to your price is indifferent between buying your game and not. Some developers and publishers try to make sure that no one is getting too great a deal. For anyone whose willingness to pay is really high, you can offer things like season passes, DLC, or other high margin items to capture all of that extra money. I personally find that kind of thing hard to do in a tasteful way. UbiSoft, EA, and Zynga don’t seem to have much of a problem with it.
I’ve said some good things and some not so good things about my former employer, Nintendo. But one thing I think they have gotten exactly right over the years is that they’ve sent a clear signal to the world that people shouldn’t just wait for a price drop. If you want to play Super Mario 3D World on Wii U, you know it’s going to be $59.99. (Again, I’ll ignore the used game market for now. Separate post.) It doesn’t matter that it’s a year and a half old. Nintendo was able to make a game for which there is no suitable substitute, and they’ve sent a clear signal that they’re standing by what they think it’s worth.
Read the entire blog post right here.